Is your business prepared for the new transfer pricing documentation requirements?

New transfer pricing documentation requirements have come into force for large multinational businesses and will apply to businesses for accounting periods commencing on or after 1 April 2023.

Our view is that UK businesses are already required to keep and retain sufficient records to demonstrate that their tax returns are complete and accurate, including in respect of any figures affected by the transfer pricing rules.

As such, this Policy only concretises what was always expected from large multinational businesses – preparation and maintenance of transfer pricing documentation in an Organisation for Economic Co-operation and Development (OECD) prescribed, standardised format.

What does the measure entail?

The measure requires large multinational businesses operating in the UK to maintain a master file and a local file in a prescribed and standardised format, as set out in the OECD’s transfer pricing guidelines.

It also introduced a requirement to complete a summary audit trail, which is a short questionnaire detailing the main actions undertaken in preparing the transfer pricing local file document.

Who is impacted by the measure?

Large multinational businesses i.e., those with a taxable presence in the UK – for example, through a UK company or permanent establishment – and are within the Country-by-Country Reporting regime (have global revenues of 750 million euros or more), as well as, potentially, individuals with ownership interests in these.

What action is required?

• Review your documentation and consider if the documentation is in the OECD format.
• Ensure robust documentation is in place to manage and implement policies correctly.
• Undertake a gap analysis to ensure the correct policies and procedure are in place to be able to complete the summary audit trail (SAT).

Most large multinational businesses with UK entities that apply best practices will already prepare suitable transfer pricing documentation.

Get in touch

If you have any questions regarding the recent changes in Transfer Pricing requirements or would like to discuss your Transfer Pricing strategy, please get in touch by filling in the form below.